Aligning E-Commerce and Brick-and-Mortar Sales Incentives

In 2009, Terry Lundgren, the CEO of Macy's, gave the keynote address at Shop.org, discussing how “the power of e-commerce extends far beyond the keyboard and right onto the sales floor.” Lundgren went on to say that Macy’s believes that $5 billion of in-store sales is influenced by the Internet.

This belief is consistent with many studies showing that consumers frequently engage with digital media, go to a retailer's website to pre-shop online and then make a purchase in the retailer’s physical store.

Despite knowledge of this behavior, many retailers have been slow to link online advertising with sales on the brick-and-mortar floor. There are a number of reasons why the retail industry has been reticent to connect online marketing and offline sales, chief among them the inability to properly attribute a purchase back to the marketing activity that drove it.

Based on our own observations at RevTrax, where we work with hundreds of retailers to link online advertising with offline sales, we see retailers struggle with this attribution issue every day. This struggle is most often due to a fundamental disconnect between a retailer’s brick & mortar operations and its e-commerce operations.

The origin of this disconnect dates back a common retail practice of late 90’s. With the rise of ecommerce, many companies built silos to varying degrees -- creating a separate entity for the ecommerce division, housing the ecommerce division in a different city or even licensing the rights to their ecommerce property to a third party.

Further isolating ecommerce from brick-and-mortar was the era’s prevailing wisdom that digital marketing was reserved for the influence of online sales. Retailers assigned marketing talent either to e-commerce or brick-and-mortar, but rarely to both. Relationships with the burgeoning digital marketing community, including agencies and myriad technology vendors, were also usually the domain of the ecommerce division.

Today we find ourselves in a situation where most of the sophisticated digital marketing expertise, operational knowledge of digital media, and relationships with digital media vendors reside with retailers’ e-commerce teams. In a true multichannel age, this digital divide is a tremendous organizational challenge that is impacting retail organizations of every size. Even as the more forward-thinking retailers redistribute talent and resources within their organizations to leverage digital media as a driver of offline sales, serious attribution issues remain. Given the retail sector’s lack of online and offline integration over the last two decades, few digital marketers or digital media vendors have tried to answer granular questions like: What metrics should be used to quantify the impact of an online ad on an in-store sale? How would you adjust a display ad manager’s compensation model to reward an in-store sale?

So how does this all get fixed?

Step 1: Senior level buy into multichannel strategy
Top executives must agree that channels do not operate in silos. They must begin to reorganize, shifting corporate culture as necessary to address the new multichannel world in which we live. It's a tremendous undertaking, but change needs to start at the top.

Step 2: Knowledge sharing
Mangers responsible for e-commerce and in-store sales need to be physically located in the same place in order to work together to share best practices, industry contacts and develop a collaborative relationship.

Step 3: Change organizational incentives
Managers who are responsible for digital media should get credit for both online and offline sales resulting from their efforts.

Step 4: Use right methods and metrics
In order to effectively measure the impact of digital media on offline sales, managers should investigate a variety of new tools and technology to connect the digital and physical worlds. Using the right technology and key metrics for measurement are critical for proper attribution.

Step 5: Test, test and test again
With change comes uncertainly, which is why it's critical to try new approaches to connect digital to in-store sales, measure results and then refine these approaches.

The convergence of online and offline is perhaps the most exciting time for the industry since the advent of e-commerce. We’ve seen time and again that organizations unwilling to make the tough choices to transform to new realties often become relics of a bygone era. Retailers that act now, both from a cultural and organizational standpoint and from a measurement, marketing and technology standpoint, will be best suited to address the new era of multichannel marketing.

Seth Sarelson is COO at RevTrax, a New York City based provider of technology solutions to measure the impact of digital media on in-store sales. He can be reached at seth@revtrax.com or visit RevTrax.com.

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